In 1965, inspired by how economists were managing the Pentagon’s budget with cost-focused analysis, President Lyndon B. Johnson decided to expand the approach to other agencies. By the late 1970s, economic thinking had pervaded government policy, guiding legislation around poverty, health care, and the environment. In 1975, the Congressional Budget Office was formed to provide nonpartisan budget analysis for lawmakers, “formalizing that this is the way we should think about legislation,” Berman said.
The rising influence of money-driven decision-making had the effect of narrowing debates over public policies, dialing down ambitions to address environmental crises, compounded by a shift in focus among many mainstream economists to the risks of rising government debt and inflation. Consider the foundational pieces of environmental legislation in the United States, the Clean Water Act and Clean Air Act of the early 1970s. They put in place strict standards for controlling pollution, regardless of economic consequences. But by 1990, environmental policy had moved away from this moral framework that stigmatized polluters, according to Berman.
“There was a big push to try to reframe environmental policy around thinking about really considering cost explicitly,” she said. Pollution was simply seen as an “externality” to put a price on, rather than something to try and stop altogether. A top-down regulatory approach had been replaced by a cost-sensitive strategy, which is inherently at odds with ambitious government action. “I think many of the landmark pieces of social policy legislation wouldn’t have existed if we had thought like that about them at the time,” Berman said.
By the time that Hansen testified before Congress in 1988, some people already viewed legislation to address the problem of the “greenhouse effect” as a threat to economic growth. Bush’s chief of staff, Sununu, worked to block climate initiatives at every turn. He saw efforts to restrict emissions as part of a larger, conspiratorial plot by environmentalists — some of whom worried that the combination of economic and population growth would lead to societal collapse. “Some people are less concerned about climate change and more concerned about establishing an anti-growth policy,” Sununu told the New York Times in 1991. The following year, he convened a “Workshop on Global Climate Change” for economists to discuss how reducing emissions would harm growth.
The American Petroleum Institute, the oil industry’s largest lobbying group, took a similar tack and began commissioning studies to put numbers behind the idea that climate policies would hurt the economy. In 1991, David Montgomery, an economist at the consulting firm Charles River Associates, calculated that a carbon tax — a fee imposed on fossil fuels — of $200 a ton would shrink the country’s economy by 1.7 percent by 2020, a finding that appeared in the Associated Press, CNN’s Moneyline, and the New York Times.
“The costs [of climate policy] would be high,” Montgomery told USA Today in 1992. “Economic benefits are uncertain, distant, and potentially small.”